McCloy v New South Wales [2015] HCA 34 – implied freedom of political communication – a case summary for law students

There are a number of case summaries that have been written on the High Court’s most recent implied freedom of political communication case, McCloy v New South Wales [2015] HCA 34 (“McCloy”). This case summary is different in that it is designed for law students and junior lawyers and the content is intended to assist in assignments and exams.

Background

Jeff McCloy, the former Lord Mayor of Newcastle and current property developer challenged the validity of several parts of the Election Funding, Expenditure and Disclosures Act 1981 (NSW) (EFED Act) on the basis that the laws impermissibly burden the implied freedom of communication of political and government matters. As you are probably aware, McCloy was before ICAC earlier in 2015 regarding political donations made far in excess of the cap. The following parts of the EFED Act were challenged:

1.       Division 2A of Part 6 which creates a general cap of $5,000 (increased annually in line with the equation in Schedule 1)) for political donations to a registered party or candidate for State elections;

2.       Division 4A of Part 6 which prohibits political donations being made by property developers, tobacco industry businesses and liquor and gambling industry businesses ; and

3.       Section 96E which prohibits certain indirect campaign contributions including provision of office accommodation, vehicles, computers and other equipment for no or inadequate consideration for use substantially for election campaign purposes.

New South Wales was joined as defendant by the Commonwealth, Western Australia, Queensland, South Australia and Victoria.

The Lange test – a reminder

A two-step test for determining whether a law is invalid due to the constitutional freedom of political communication was developed in Lange v ABC (1997) 189 CLR 520 (“Lange”)):

Step 1 – Does the law effectively burden political communication in its legal or practical operation?

Step 2 – Is the law reasonably appropriate and adapted to serve a legitimate end in a manner which is compatible with the system of representative and responsible government established by the Constitution?

How did McCloy build on the Lange test?

At issue in McCloy was the nature of Step 2 of the Lange test. The majority adopted a proportionality approach which neither Gageler J, Gordon J or Nettle J agreed with.

Lange remains the authority for the test for the constitutional implied freedom. McCloy adds to Lange by clarifying the steps to take when deciding whether the measure is “reasonably appropriate and adapted” to achieve a legitimate end ([70]). In McCloy, the majority refers to this as the “proportionality test” and specifies three elements that must be established before the proportionality test is satisfied – suitable, necessary and adequate in its balance.

What was the outcome in McCloy?

The outcome (6:1 - French CJ, Kiefel, Bell and Keane JJ, Gageler J, and Gordon J : Nettle J) was that none of the EFED Act laws challenged exceeded the implied freedom of political communication derived from ss.7, 24, 64 and 128 of the Constitution. However, while the majority in their joint judgment (French CJ, Kiefel J, Bell J and Keane J) came to this conclusion through the proportionality approach, Gageler J applied Lange in its classic sense and rejected the majority’s proportionality approach, while Gordon J rejected the “balancing” aspect of the majority’s proportionality approach. Nettle J found the laws prohibiting donations from building developers were invalid, as they discriminated particularly against this group, and the justification was not sufficient to warrant this discrimination. Nettle J found it was unnecessary to decide on the proportionality point. The outcome on the proportionality point was 4:3 (French CJ, Kiefel, Bell and Keane JJ : Gageler J, Gordon J and Nettle J).

What you need to know – the three question test from the joint judgment

The joint judgment commences at paragraph 2 by reiterating that the Constitutional implied freedom of political communication is not an absolute freedom, but a qualified freedom that is implied in order to ensure the people of the Commonwealth may “exercise a free and informed choice as electors” (Lange). Relying on Lange as modified in Coleman v Power (2004) 220 CLR 1, and adding a proportionality analysis to the second limb of Lange, the High Court succinctly set out the three questions to answer when determining if a law exceeds the implied freedom of political communication on governmental and political matters. I have converted this information into a flow chart:

*"Compatability test"

The compatability test requires firstly that the following be identified:

1.       The purpose of the law; and

2.       The means adopted to carry out the purpose of the law.

Both (1) and (2) must be “compatible with the constitutionally prescribed system in the sense that they do not adversely upon the functioning of the system of representative government”. The compatability test is a rule derived from the Constitution itself ([68]).

^#“Proportionality test”

The High Court majority added a proportionality test to the second limb of Lange. All three elements must be satisfied before proportionality can be said to exist:

1.       Suitable – “having a rational connection to the purpose of the provision”.

If the measure cannot contribute to the realisation of the statute’s legitimate purpose, it cannot be said to be reasonable ([80]). The majority indicate this is consistent with both Lange and Unions NSW v New South Wales (2013) 252 CLR 530 (“Unions NSW”).

2.       Necessary – “there is no obvious and compelling alternative, reasonably practicable means of achieving the same purpose which has a less restrictive effect on this freedom”.

This inquiry is to whether there is other, equally as effective means of achieving the legislative object which have a less restrictive effect on the freedom. These alternative means must be obvious and compelling. The majority indicate this is consistent with the approach taken in Lange and Unions NSW ([81]).

3.       Adequate in its balance – requires the judge to make a value judgment “describing the balance between the importance of the purpose served by the restrictive measure and the extent of the restriction it imposes on the freedom”.

The High Court said analysing the balance between the purpose and the extent of the restriction logically inheres in the Lange test, although this is the first time the High Court has “fleshed out” that this requirement is a necessary part of the second limb of the Lange test ([86]). In the balancing aspect of the proportionality test the positive effect of realising the law’s proper purpose must be balanced with the negative effect of limiting the constitutional freedom. The greater the restriction on the freedom, the more important the public interest purpose of the legislation must be for the law to be proportionate or balanced ([87]).

Applying the test to the provisions of the EFED Act – the joint judgment

Question 1 – does the law effectively burden the freedom?

In Unions NSW a case concerning the operation of Part 6 of the EFED Act, the High Court identified the burden as a restriction on the source of the funds available to political parties to meet the costs of political communication, as even with the public funding provided for in Part 5, a party or candidate will have to fund any shortfall. In McCloy, the majority identified this as the relevant burden. McCloy’s lawyers made an additional submission that the EFED Act prevents donors from making substantial political donations in order to build and assert political power. The High Court rejected this submission, as the ability to make substantial donations is not part of the implied freedom. Guaranteeing the ability of a few to make large political donations goes against the underlying principle of ensuring individuals have an equal share in political power ([28]).

Once the Plaintiff has established the law burdens the freedom, the burden then shifts to the Defendant to justify that burden by answering “Question 2” and “Question 3”.

Question 2 – is the compatibility test satisfied? Is the purpose and means compatible with the system of representative government provided for in the Constitution?

Div 2A Part 6

The purpose of Div 2A was identified as preventing and reducing the amount of corruption and undue influence in the government of the State, as well as to overcome perceptions of corruption and undue influence. The means to achieving this purpose in Div2A is to set a general cap on political donations. Capping political donations is consistent with representative government, as it helps to ensure equality of opportunity to participate in the political process and that one voice does not drown out others ([43] to [47]).

Section 96E

As s.96E is effectively an anti-avoidance provision which attempts to prevent donors getting around the general cap in on political donations in Div 2A, the validity of s.96E depends on that of Div 2A. As Div 2A passes the compatability test, so does s.96E.

Div 4A Part 6

Div4A prohibits property developers from making political donations. McCloy submitted that there is nothing special about property developers that make them more likely to make corrupt payments than other entities ([48]). The High Court accepted New South Wales submission that property developers can be distinguished from other participants due to their dependence on decisions of government in matters such as land zoning and development approvals. The purpose of Div 4A in reducing the risk of undue or corrupt influence in planning decisions where the risk is greater than in other areas of official decision making is legitimate, as are the means adopted to achieve the purpose ([53]).

Question 3 – is the proportionality test satisfied? Is the law suitable, necessary and adapted?

The majority found the proportionality test was satisfied for all the provisions of the EFED Act in dispute. The effect of the laws on the freedom is indirect. The negative effect of reducing funds available to election campaigns and restricting communication by political parties and candidates to the public needs to be balanced with the public interest in removing the risk and perception of corruption. The majority concluded the restriction on the freedom is more than balanced by the benefits sought to be achieved in removing the risk and perception of corruption ([93]).

Gageler J’s judgment

Gageler J dissented from the majority in his characterisation of the second part of the Lange test, rejecting the need for a proportionality test and highlighting two main problems with the majority’s proportionality approach:

1.       One size does not fit all, and the standardised criteria in the proportionality approach will not fit all cases ([142]); and

2.       Requiring a law to be “adequate in its balance” is not sufficiently focused on the reasons for the Constitutional freedom. Equating “strict proportionality with “specific balancing” has always been a controversial approach ([146]).

Gageler J’s formulation of the second stage of the Lange test is that there must be an explanation and a justification. First, the imposition of the restriction on political communication must be explained by the law’s object. Second, the restriction on political communication that is imposed by the law must be justified by the law’s reasonable pursuit of the identified legitimate end.

Nettle J’s judgment

Nettle J neither agreed nor disagreed with the majority’s strict proportionality analysis, as “for present purposes...it is unnecessary to delve into strict proportionality” ([222]). While Nettle J held the donation caps and restrictions on indirect contributions passed the two step Lange test were valid, Nettle J departed from the majority and held the laws prohibiting donations from property developers to be invalid. This was because Div 4A of Part 6 discriminates against a particular segment of the community, requiring strong justification, which was not present ([257]).

Gordon J’s judgment

Gordon J agreed with the majority on the outcome, however decided it was not necessary to limit the way in which a court can be satisfied of the second limb of Lange. Gordon J held that a court may consider whether there are more compelling, reasonably practicable ways of achieving the same end, but this will not always be necessary and there are many ways in which a court could approach the second limb of Lange, and the second limb should not require a set sequence of steps. Gordon Jdirectly rejected that “balancing” is a part of the second limb of Lange “as there are no criteria or rules by which a “balance” can be struck between means and ends” ([336]).